We can easily see that Wendt an outperformer in this category, while Grindwell Norton comes a close second (and both are debt-free). Compare these two companies (forget Orient Abrasives for a moment) with Carborundum Universal and see that Wendt and GN are much better performers than CUMI.
But what does the market say? The market says that CUMI is worth 25 times PE multiple, while Wendt only 18.5 times PE multiple and GN is much lesser. In fact, as recently as March 2011, Wendt was quoting at 11 PE multiple, while CUMI was quoting at multiple even though performance of Wendt was much better than CUMI. Delisting mania took over, and Wendt shot up promptly to what I still slightly undervalued figure of 1500 (CMP: a 17 PE multiple (currently 18.5).
What does that indicate? It indicates that I should do this industry analysis more often that I that we could have had a 60% gain in Wendt, compared to a paltry 25% gain in CUMI off March 2011 that tells you that Mutual Funds are somehow fascinated with CUMI (most mutual funds have this like Wendt (probably, they want to get entangled in this delisting mania).
A bettercomparison would be if you take the consolidated financials for CUMI. It’s now trading at 168 which is around 15x its trailing 12 months EPS. It’s also the co-promoter of Wendt & market leader in India.
Disclosure: I’m invested in CUMI.
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Kiran
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